Maker of Peugeot, Citroen eager to partner Proton

KUALA LUMPUR, Feb 26 2017 : Renowned car maker, France’s PSA Group, has ambitious plans to transform Malaysia into a strategic base to develop and manufacture a new range of cars destined for the global market if its proposed partnership with Proton comes to fruition, an industry source said.

He also said that the PSA Group, which makes the world famous Peugeot and Citroen cars, is looking to open an Asian Research and Development (R&D) centre.

That means if they bag Proton Malaysia, it would naturally benefit by being named PSA’s Asian R&D centre, he said.

Therefore, joining hands with a foreign strategic partner (FSP) would enable the national car manufacturer to go global.

Currently, as a standalone company and under-utilising the manufacturing capacity of its two plants, he said it would be impossible for Proton to achieve the economies of scale to compete in the global market.

Proton requires know-how and funds for R&D programmes to compete with global car brands, here and abroad, as it is still at the bottom of the ladder in home-grown automotive technology.

This is simply because the cost of R&D runs into billions of ringgit and Proton, on its own, cannot afford to go it alone, he told Bernama.

A case in point is the development cost of just one model, the Proton Iriz, which was at RM600 million and this did not include marketing, distribution and other related costs.

Just to recover the development cost of RM600 million — at roughly RM60,000 per unit, Proton would have to sell 10,000 Iriz cars, the source said.

Other players, such as Honda and Toyota, are able to spread their costs across millions of cars as their cars are sold worldwide.

“Thus, the cost is spread with the volume across many countries,” the source said.

Early this week, China’s Geely Automobile Holdings Ltd said that it is prepared to share with Proton its know-how, co-developed with its Swedish subsidiary Volvo car, as part of the company’s pitch to seek control of Proton.

In addition, Geely’s Volvo in Malaysia had attained Energy Efficient Vehicles (EEV) status for its models equipped with Drive-E powertrain last year.

The source said that the writing on the wall is all too clear for Proton to join hands with a FSP if it is to succeed.

“The only way to do this is by marrying a big auto player, two of which have submitted their bids, as of February 15, seeking Proton’s hand in marriage for what could be a long-term mutually rewarding relationship,” he said.

An auto analyst cited how Proton still produced cars with Euro 4 engines which made it impossible to sell cars to the United Kingdom as the European market only wanted engines with Euro 6 car emission standards.

However, a foreign partner could facilitate the production of new engines through new and updated designs and technologies, which are accepted in developed markets.

In the process, penetrating developed markets, which would ramp up production at its manufacturing facilities, could go a long way to revive Proton.

Realising this and the need to go global, auto conglomerate DRB-Hicom had always intended to look for a FSP since acquiring Proton in March 2012.

As Second Finance Minister Datuk Johari Abdul Ghani pointed out last week, the government kept Proton for 32 years and Khazanah tried to revive it but they too were unsuccessful.

Now, Proton has been passed to DRB-Hicom which realised that the national car manufacturer needed to do more than produce cars for the domestic market as it needed to market the cars overseas to increase volume and sustain the company.

With a foreign partner, some 100,000 direct and indirect jobs would be secured, as well as, create more job opportunities. – Bernama